The Ideal 3.3% TFSA Dividend Stock Paying Constant Cash

Fortis stock is a an extremely reliable and predictable dividend growth stock that’s well-suited for your long-term dividend needs.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published May 27, 9:00 pm EDT

Fortis Inc. (TSX:FTS) is one of North America’s largest utilities. It’s also one of the most reliable dividend stocks with the longest track record of predictable, growing dividends. This is what makes Fortis stock an ideal choice for investor TFSA accounts.

Let’s look into it.

A glass jar resting on its side with Canadian banknotes and change inside. — Source: Getty Images

The ideal utility stock

With five 100% regulated utilities in Canada, the U.S., and the Cayman Islands, Fortis stock is well-set up to continue to provide TFSA investors with quarterly cash dividend payments. These dividend payments have a long history of over 52 years of consecutive increases, and they are backed by the company’s predictable, steadily growing cash flows.

The economic and geopolitical backdrop is uncertain. Ideally, TFSA dividend income should be certain. This is the gift that Fortis can give to investors – certain, predictable dividend income in every economic and geopolitical environment.

In the last 52 years, Fortis stock’s dividend was increased. In the last 20 years, Fortis stock posted a cumulative total shareholder return of approximately 630%. This was approximately 60% higher than the S&P/TSX Composite Index’s return. In the last three years, Fortis’ annual dividend per share increased at a compound annual growth rate (CAGR) of 6.5% to $3.53. Looking ahead, the company is forecasting a 4% to 6% annual dividend growth rate until the year 2030.

Fortis – Q1 results

In Fortis’ latest results, the company reminded me once again why it’s the best Canadian stock to own in uncertain and volatile times. Adjusted earnings per share (EPS) came in at $0.99, which was consistent with the prior year’s result and in line with expectations. Fortis’ strong results continue to be driven by strong rate base increases and strong cost discipline.

Looking ahead, Fortis stock continues to execute its five-year capital plan. This plan will see the company invest $28.8 billion from 2026 to 2030. This growth plan is a highly executable, low risk one that will support rate base growth of 7% over this time period.

But it doesn’t stop there. Long-term plans are also being developed to help take Fortis into new and growing energy markets as the demand for energy continues to accelerate. For example, Fortis will continue to invest in cleaner burning natural gas and liquified natural gas (LNG) facilities as North America continues to move away from coal toward natural gas.

A TFSA dividend stock with a respectable yield

Fortis is currently yielding a respectable 3.3%. Considering that Fortis’ yield is the closest we can get to a risk-free return, this is pretty fantastic. The expected annual dividend growth will add to this yield over time. Adding Fortis stock to your TFSA gives you these constant cash dividend payments tax-free.

The bottom

As a utility stock that is pretty much sheltered from a lot of the market volatility, Fortis stock is truly in a unique position. In a world where downside volatility seems increasingly likely, the value of this type of stock cannot be overstated.

Investors should therefore seriously consider buying this TFSA dividend stock for added portfolio stability and income.